Anagram Report on NIIT limited

(BSE: 500304 | NSE: NIITLTD | ISIN: INE161A01020)

BACKGROUND & BUSINESS NIIT Ltd. has emerged as Asia’s No. 1 trainer and leading Global Talent Development Corporation in past three years. It offers learning and knowledge solutions to 5 million students across 32 countries. NIIT Ltd.’s business can broadly be divided into four lines of activities:

1) Individual Learning Solutions: NIIT’s Individual Learning Business offerings include: Industry-endorsed programs for students seeking careers in IT: GNIIT , Integrated ANIIT for Engineers (IAE) and Advanced Technology Programs for IT professionals.

2) School Learning Solutions: NIIT School Learning Solutions (SLS) offers turnkey IT and ICT integration program for schools. NIIT SLS has provided computer-based learning to over 5000 government and private schools.

3) Corporate Learning Solutions NIIT’s Corporate Learning Solutions, offers integrated learning solutions (including strategic consulting, learning design, content development, delivery, technology, assessment and learning management) to Fortune 500 companies, Universities, Technology companies, Training corporations and Publishing houses. NIIT acquired US-based Element K, a leading provider of learning solutions for US $40 mn in August 2006. Element K delivers learning solutions for customers and partners through a tailored combination of catalog learning products, technology, and services .

4) New Businesses For working professionals, NIIT Imperia , Centre for Advanced Learning, offers Executive Management Education Programmes in association with Indian Institutes of Management (IIMs) at Ahmedabad, Indore and Kolkata. NIIT Institute of Finance Banking & Insurance (IFBI), formed with equity participation from ICICI Bank, offers programs to develop talent for the banking industry.

Education: One of the biggest business opportunities in India today. There are about 350 odd universities and 18,000 colleges providing higher education in the country, to about 10% of the relevant age group. This is extremely inadequate in a country where the demographic dividend by way of a young population of about 550 million youth.

BCG analysis believed by 2020, India would have a 47 million surplus workforce (aged between 15 to 59) while developed countries would have a shortfall of 39 million.

According to one estimate India’s school-aged population will be 37% higher than China’s by 2025. Given the government’s goals of spending close to 5% of GDP in education, the overall education market could be worth more than US$50 bn a year. Companies such as NIIT were the pioneers of IT training and are now extending their reach successfully in other sectors, such as financial services and retail.

School Learning Solutions: Strategic tie-ups to yield good results NIIT’s Schools Learning Solutions in association with Key Curriculum Press (U.S.A) introduced MathLab to enhance its offering for the CBSE schools and partnered with NComputing to offer cost effective learning solutions for schools in the country.

Element K: Improving profitability NIIT and Element K combined would have 2nd largest content library in the world and would emerge as one of the leading global providers of learning solutions with more than 1500 clients, 3,200 employees, over US$250mn in revenues and presence in 32 countries. Company witnessed strong growth in Individual Learning Solutions and improved profitability of Element K (USA) in latest quarter.

NIIT’s Corporate Learning Solutions added 10 new customers across U.S.A, Europe and India, and a robust order intake of $39M, which represents a 37% growth over last quarter.

New Businesses: Revenue growth driver NIIT launched new businesses such as NIIT IFBI (training for Finance, Banking, Insurance and allied services) and NIIT Imperia (Executive management education) in October 2006 to cater to the growing requirement of talent in areas other than IT.

Institute of Finance Banking & Insurance has tied up with HDFC Bank and YES Bank to expand within the banking sector; implemented new programs for the insurance sector in partnership with ICICI Prudential and with ICICI Securities for the financial services sector.

NIIT Imperia has tied up with Indian Institute of Foreign Trade to expand its offering in the Executive Management Education space. With an initial set up of six centres, this number is expected to go up to 30 by FY09E. We believe tremendous growth potential lies in these areas and we expect this segment to contribute more than 10% of its profits by 2009.

RISK CONCERNS

  • US slowdown and its impact on IT training and education is the single biggest risk being faced by the company.
  • Any delay in execution of ambitious growth plans of Imperia or University business will result in lower financial revenues and profits.
  • Company’s business plan revolves around its strategic tie-ups and acquisitions. If any issue related to integration crops up it may severely hampers the growth.

NIIT Ties up with CISCO NIIT Ltd has tied up with Cisco, global leaders in Networking and infrastructure Management, and the Company has agreed to develop and enhance the IT Infrastructure management talent pool in the Asia Pacific region. As part of the agreement, the Company will offer training programs on Cisco’s latest tools and technologies in the Networking and the Infrastructure Management space, across NIIT’s select IT education centres in the Asia Pacific region. NIIT will provide training on Cisco’s authorized curriculum and enable Cisco certification for students aspiring to build careers as networking, professionals and system engineers.

NIIT – ETS, NIIT Announce Strategic Alliance in India NIIT Ltd has announced that Educational Testing Service (ETS), the world’s leading educational measurement and research organization, and NIIT have entered into a strategic alliance to offer ETS suite of products in India. The new initiative will enhance employability and provide competitive advantage to Indian organizations in the global market place.

NIIT Ltd. Acquires Evolv Management NIIT has signed the Share Purchase Agreement to acquire 47.87% of share capital in Evolv Management. Further, Evolv has also become the subsidiary of the Company.Evolv is a Noida based Company engaged in the business of providing training in English language and communication skills.

VALUATION AND RECOMMENDATION: NIIT Ltd. was a pioneer in IT training. The company is trying to extend its leadership position to other talent development areas in India and abroad. According to estimates, overall education market in India could be worth more than 2 lakh crore a year. We believe the company is sitting on a cusp of a tremendous growth opportunity where revenue and profits can grow manifold.

Looking at the current market conditions there is a possibility of a decline in the stock price if general market corrects. Long-term investors can buy the stock and average it on declines.

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